LiveValuation Magazine: Neutral Valuation

The September issue of LiveValuation Magazine was released online yesterday. There are several articles, but the most worthwhile is a piece written by Jonathan Miller, author of the Matrix blog.

In his opinion piece, Neutral Valuation, Miller summarizes the ordeals we have all experienced as appraisers, and makes the case for appraiser neutrality. There is much to like in this article, but I have a couple of favorite sections:

Over the past decade the global credit boom ultimately forced most experienced appraisers to choose between feeding their families or changing their business models and even their careers. The refrain “always hit the number” would get you more work. After the credit crunch, the refrain was modified to “occasionally hit the number” and you get more work. The sheer critical mass of the moral flexibility of many in our profession during the go-go credit era nurtured a whole new class of appraiser: the form filler that dominates the profession to this day. They work well with the gum-chewing 19-year-old appraisal processors who call every day on the status of an assignment, having no idea what an appraiser actually does and only cares when the report will be delivered.

and...

Following the credit crunch, the valuation bias is now in the opposite direction. In fact many of the morally flexible appraisers that were biased toward higher valuations for mortgage brokers during the boom, are the same appraisers biased toward lower valuations for appraisal management companies the in post-boom world. These appraisers are rewarded for performing high-volume work at low fees and conservative values. And these values aren’t just low by a few percentage points. We have observed values from a nationally well-known appraisal management company as much as 50 percent below current market value for a property with multiple bidders, largely because the appraisers they use have no local market knowledge.

and....

Since the beginning of my career, I’ve always held out hope that most of my clients actually wanted me to provide “the number” that represented market value. Some clearly did.

I’ve found the concept of neutral valuation to be intoxicating and powerful in my business. As a result of shifting our practice toward clients that actually want to know “the number,” we have remained at our most profitable level in our 25-year history.

Fire your retail banking clients and stop burning calories for clients that don’t want your expertise and will only pay for a form filler. If you don’t they are going to fire you eventually and your practice will die a slow death.

It is better to serve and expand on clients that actually want to know what “the number” really is. You’ll be surprised at how your quality of life improves and how much more business you are able to get.

Great work, Jonathan!

Read the whole thing.

More on The Appraisal Foundation Side - Jonathan Miller Interviews David Wilkes

Sure, this is inside baseball, but it IS important to appraisers and the appraisal profession. Jonathan Miller has an regular feature on his blog, MATRIX, and iTunes, The Housing Helix. He interviews a variety of folks about timely topics of interest to anyone involved in real estate. This week's podcast is with David Wilkes, Chairman of The Appraisal Foundation Board of Trustees.

It's important to hear about the kerfuffle from The Appraisal Foundation's point of view. Mr. Wilkes answers some tough questions and pulls no punches. It's worth your time.

WHAT ABOUT THAT WELLS FARGO RVS DESKTOP APPRAISAL?

UPDATE!! - APPRAISER ACTIVE receives NASTYGRAM from Wachovia!

UPDATE #2 - JONATHAN MILLER weighs in - Will Wachovia send a NASTYGRAM his way?

This post has been modified in response to the email received yesterday (February 15, 2010) from the friendly, helpful folks at Wachovia.

This is the message sent to me by Wachovia.

Greetings,

Recently the following posts were added to your forum, the links of which are included below:

http://appraiseractive.blogspot.com/2010/02/what-about-that-wells-fargo-rvs-desktop.html

The posts include information that is confidential, proprietary, and intended only for the use of the owner of the e-mail address listed as the recipient of the original message. The posts did not include the email disclaimer originally included and is shown below for your review:

The information contained in this electronic message is confidential, proprietary, and intended only for the use of the owner of the e-mail address listed as the recipient of this message. If you are not the intended recipient, or the employee or agent responsible for delivering this message to the intended recipient, you are hereby notified that any disclosure, dissemination, distribution, copying of this communication, or unauthorized use is strictly prohibited and subject to prosecution to the fullest extent of the law. If you are not the intended recipient, please delete this electronic message and DO NOT ACT UPON, FORWARD, COPY OR OTHERWISE DISSEMINATE IT OR ITS CONTENTS.

Please remove any and all posts that include the information of this email in whole or in part, as this is a violation of its intended use.

Please advise me if legal recourse is necessary to have these posts removed from your website.

Thank you,

Jose J. Ramirez

Web Developer III

Residential Valuation Services

Telephone (210)543-5921

Fax (210)543-3128

Mail Code T7400-01E

Email jose.j.ramirez@wachovia.com

Well!

In response, here is the modified post:

Appraisers across the county found a communication in their email inbox from a firm affilliated in some way with Wachovia with an announcement for an exciting new opportunity.

YAY!!!!

What did the communication say?

It described the merger/acquisition of Wachovia by Wells Fargo and the resulting creation of two appraisal groups within Wachovia Settlement Services. These are Wachovia Settlement Services (WSS) and Residential Valuation Services (RVS). These two groups apparently share resources and will continue on that path.

The communication (which, by the way, DID NOT come to me from Wachovia) goes on to describe a new "product" to be used for loan servicing ad default appraisal needs for divisions of Wells Fargo.

The new "product" is the Wells Fargo RVS Desktop Appraisal. Included was a link to a PDF with instructions and guidance for:

• Compensation
• Appraisal Requirements
• Instructions for completing the "product"
• How to submit your name and be awarded contingent fee assignments for this exciting "product"

These folks also announce that appraisal requests would start on Saturday, February 13th. SATURDAY!! What's up with these folks?

Included in the correspondence was LINK to THIS "NIFTY" GUIDE.

---------------------------------------------------------

It's yours to decide if you would like to accept an assignment from an outfit that cannot spell "APPRAISER".

It's yours to decide if accepting assignments that pay $55.00 (net $51.00) is part of the business plan you have adopted.

It's yours to decide if you believe it's safe to upload a jpg of your signature to such a reputable company.

Compliance with USPAP, however, is not a choice for the appraiser.

For starters, let's take a look at just one small problem with this offer; it's a contingent fee arrangement.

Fees (Compensation), Charges, and Service Level Agreement (SLA)

1. The fee (compensation) paid for completing this product is $55.

2. There is an AppraisalPort charge to you of $4 for each assignment completed and returned with a value.

3. There will be no fee paid for a “No-Hit”, and no charge to you for returning a "No-Hit” through AppraisalPort. (Note: This product has a “No-Hit” component which means that either it is an ineligible property type or you were unable to develop a credible value. The compensation of $55 takes into consideration that you will from time to time have a “No-Hit”. For more on “No-Hits”, see the report instructions on page 6.)

4. There will be no additional charges to you for using Data Express provided that you are only accessing the RVS Desktop Form and Location Map features. Using any other features (plat map, comps search, etc.) will result in additional charges (refer to published pricing plan in Data Express). RVS and WSS are not responsible for any additional charges that you incur completing these assignments.

5. The Service Level Agreement (or turnaround time) is two (2) days.

6. All of these reports will be reviewed by the RVS Quality Control Department and reports returned to you for correction must be resubmitted within 24 hours.

For those of you certified in Florida, it might be wise to take a look at Chapter 475, Part II, particularly 475.624 (17):

(17) Has accepted an appraisal assignment if the employment itself is contingent upon the appraiser reporting a predetermined result, analysis, or opinion, or if the fee to be paid for the performance of the appraisal assignment is contingent upon the opinion, conclusion, or valuation reached upon the consequences resulting from the appraisal assignment.

That's it for now. If time permits, we might get around to noting some other problems with this offer. In the meantime, it's your decision.

Quantrix LLC (First American) - Quality is Priority 3?

According to a pdf flyer, "Quantrix LLC was founded by First American and JPMorgan Chase Bank in 2000 as a privately-owned joint venture. JPMorgan Chase is the largest financial institution by deposit base in the US and First American is the nation’s largest real estate data provider." Although it appears to be a promotional piece for valuation services, the main selling point appears to be this closing statement:

Quantrix provides world class customer service and will deliver your appraisals with turn times consistently higher than the competition.

Hmmm.....

Well, that's just a flyer, and it doesn't disclose much about the company, their motivations, or their priorities. Maybe, if we take a look at a recent job posting, we can make a determination about their prioritization related to providing valuation services. How do they rank quality, price, turn around time? Is it true, as stated in a guest post on Jonathan Miller's Matrix that "AMC’s shop around for the lowest appraisal fees that frequently end up on the desks of appraisers who are geographically distant from the subject property’s market, are not fully familiar with the local market and thus present sales that are not directly relevant", or do they present different priorities in practice?

Read the job posting for an Appraisal Coordinator. The priorities are clear in thse excerpts.

Processing Analysts are responsible for the timely and accurate placement of all Conventional and FHA orders within 24 hours of their receipt. Proper placement is ensured by the PA’s analysis of the appraisers available and selection of one that meets the company standard turnaround time, profitability requirements, and quality standards. Complete and concise documentation, as well as clear communication to all parties, is required on all files.

ESSENTIAL FUNCTIONS:

• Placing orders. Focusing on rushes, orders on Hold, Finals and orders over 48 hours old first. Order Placement standards are as follows: Conventional - Placed with in 2 hours of activation, FHA – Placed with in 4 business hours, Declines – Reassigned same day, and Holds – Followed up on daily until resolved. The goal is to have 92% of all orders placed with in 24 hours. Each PA will be responsible for calling on any non accepted orders within their area along with placement of new orders.

• Assuring vendor acceptance of the Quantrix Valuation standard turn around time of 5 business days.

• If an appraiser requests a higher fee or longer tat, the PA is expected to get a minimum of 2 other quotes (for a total of 3) in order to determine the best appraiser option for each order

• After eliminating all reasonable options in VOM (by checking previous orders in the subject area and checking the vendor coverage detail report) a One Time Vendor can be used, check http://www.yahoo.com/ or the other web-sites given.

• Shorten turn around times by establishing a good flow of communication with our appraisers, keeping in contact with both the appraiser and lender to accomplish this goal.

• Holds – When the reason a hold was requested is out of the appraiser’s control, place the order on hold and contact the client to update them and-or request needed information.

• Fees – Products have a standard flat fee regardless of what state the property is located in on all properties up to 1 million dollar or 1.5 million dollars dependent on nusiness line. For this reason it is important for PAs to attempt to place the order to an appraiser with the lowest fee to maintain our profitability. On orders over 1 million dollars the PA is to obtain 3 fee quotes from 3 different offices before assigning the order. In situations where we must use a one time vendor or fee appraiser the PA will need to check as many options as possible to obtain the lowest fee.

Quality? It's priority 3!

REALTOR Mag - The Trouble With the HVCC

Here is the long awaited REALTOR® Magazine article about the Home Valuation Code of Conduct (HVCC), HAVOC. Blanche Evans, Stacy Moncrieff and I spent quite a bit of time discussing the issue, including the initial investigation, the companies under investigation, appraisal practices, appraisal standards, enforcement and the effects of the HAVOC on the appraisal profession and real estate markets. In an effort make sure all points of view were represented, I furnished names and contact information for several parties in favor of the agreement, including several folks involved with Appraisal Management Companies (AMC).

Not only did Blanche and Stacy collaborate to produce a balanced and informative article, the story includes the best HVCC/HAVOC graphic encountered by Appraiser Active. We might just award a gold star or seal for that one.

It's appropriate for the article, "The Trouble With the HVCC" to start with a quip from Jonathan Miller:

"You can't make this up," New York appraiser Jonathan Miller riffed in his entertaining blog, Matrix, back in June.

Miller was recounting the frustration of a real estate salesperson who was trying to refinance her own New York apartment with her current lender. According to Miller's telling, the out-of-town appraiser walked into the apartment, threw his hands in the air, and asked "How am I supposed to appraise this thing?"

Of course, the favorite quote is from yours truly:

"The HVCC sets up AMCs as the guardians of appraiser independence, and isn't it ironic that the investigation that prompted the rules centered on an AMC allegedly manipulating the system to please its customer?"

Later in the article comes this gem:

For the largest lenders, AMCs are simply the way business is done today. "When you're ordering thousands of appraisals every single day, the risk to you is extraordinary," says Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association in Pittsburgh, which represents a variety of settlement service vendors, including large AMCs. "Would it make sense to hand those off to thousands of [independent] appraisers?"

To which Appraiser Active responds: "Yes, it makes sense to "hand off" those to thousands of [independent] appraisers. Unlike Appraisal Management Companies, the appraisers are licensed and certified by an agency of government and subject national standards; recognized by every state and territory of the United States. What appraisal standards must the Appraisal Management Companies follow?" Which agency of government regulates their involvement in brokering valuation services?

There's much more. Read the whole thing right HERE.

UPDATE: Jonathan Miller provides his take on MATRIX.

Great Post on MATRIX

If you're not reading Jonathan Millers MATRIX, we suggest adding it to your regular reading list. Even if you fail to add it as a daily read, please surf on over and take a look at today's Guest Post by Martin Tessler, CRE. He comments on a June 9, 2009 Wall Street Journal article, Appraisals Roil Real Estate Deals.

It's not a long post, but it includes these gems:

A significant issue not quelled by the Code is that it allows if not encourages lenders to outsource the selection to appraisal management companies or AMC’s who will charge the appraisal firm anywhere from 30%-40% of the fee for administration, overhead and, pardon the sarcasm, quality control. Exacerbating the problem is that lenders can own stakes in AMC’s. Thus, the conflict of interest is ever present.

Reports are prevalent that AMC’s shop around for the lowest appraisal fees that frequently end up on the desks of appraisers who are geographically distant from the subject property’s market, are not fully familiar with the local market and thus present sales that are not directly relevant.

(emphasis is mine)

Read the ENTIRE ARTICLE. While you're there, spend some time looking around and peruse his PODCASTS.